2 Feb 28 @ 10:56am by Matt Smith in Capital Markets, Crude Oil, Global Energy, Natural Gas, risk management, Risk Strategy

Could The Biggest Success For NGVs Be At Sea?

As natural gas becomes ever more prevalent as a global fuel, there are increasingly more inventive ways of both consuming and transporting it (see left). While here in the US there is ever greater focus on CNG and LNG-powered vehicles, there is potentially another form of transport that could steal the crown as the King of NGVs…shipping. So after sailing through a sea of research this week, here is the treasure trove of info I have gathered on my travels:

–In recent years the world’s fourth largest vessel classifier (Det Norst Veritas) has said that LNG will dominate ship fueling within four decades, with the majority of owners asking for LNG fuel tanks by 2020

–Strict fuel standards have been mandated by the International Maritime Organization to cut emissions of sulfur oxide to 0.5% by 2020. The use of LNG instead would virtually remove all of these sulfur oxide emissions, reduce nitrogen oxide emissions by 80%, and reduce carbon dioxide emissions by 20%

–These stricter fuel standards mean shipowners have limited options: they can either install expensive equipment (scrubbers), purchase higher-priced low-sulfur oil, or………..switch to LNG

–But, oh boy, it is not cheap to convert a ship to operate on natural gas. It would cost $24 million to convert a Great Lakes bulk carrier

–Meanwhile, to build an LNG-powered vessel outright costs about a 10% premium compared to building a diesel powered ship

–According to research from Exxon Mobil, global marine fuel demand will increase by 90% by 2040. Natural gas used for transportation as a whole will quadruple to make up 4% of the global transportation fuel mix: –Space also becomes an issue with LNG-powered ships, as LNG provides less energy compared to the equivalent amount of oil, which could take up 3% or more of potential cargo space

–Here are some facts we looked at relating to LNG many, many moons ago here on the burrito

–According to Exxon, natural gas will account for 8% of total fuel demand from the marine sector by 2040

–But to temper immediate optimism, there are less than 50 LNG fueled vessels currently operating worldwide, with the main focus of these being car and passenger ferries. They virtually all operate in Norway, the Baltic, or the North Sea

–There is also the near-term hurdle that some LNG ships being built can only actually be hybrids, running 4,000 miles on LNG, before potential switching to bunker fuel to run another 10,000 miles

–The seed of this post was sown by receiving a copy of this report last week. It highlights the two key elements which make LNG an attractive proposition: its comparative environmental impact (versus oil) and the comparative fuel costs involved

–Perhaps the most succinct summation on LNG as a marine fuel is from this article, which says ‘its availability, cost and utility need to be demonstrated before this fuel emerges as a plausible option to low-sulfur fuel‘. But given the consumption volumes involved, from both an environmental and cost perspective, it seems at least worth further investigation. This graphic sums up the consumption levels involved:

2 Comments on this post:

  1. Reedy says:

    Hi Matt,are you not aware of MSAR? Created by Quadrise fuels?…perhaps you could look into this option and do article cheers:)

  2. Matt Smith says:

    I found the home site – will check it out, thanks!

    http://www.quadrisecanada.com/fcs-low-cost.php

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